Medicare Part D Enrollment Explained

Medicare Part D Program Overview and History

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established the Medicare Part D plan. It was put into effect in 2006. Medicare Part D offers voluntary drug benefits for about 56 million elderly and disabled individuals through the use of private healthcare plans approved under strict guidelines set by the federal government. As of 2016, nearly 41 million people are enrolled in a Part D drug plan.

The purpose behind Medicare Part D is to help make prescription drugs more affordable for the elderly and disabled. Plans may provide coverage in the form of “stand-alone” Part D plans that cover just prescriptions, or they may be part of a plan that provides both Medicare health and prescription coverage, which is known as a Medicare Advantage plan (MA or Medicare Part C).

The cost of Medicare Part D prescription or Medicare Advantage plans

The monthly premium that you will pay for each type of plan depends specifically upon your plan, the state you live in and a few other factors specific to your situation. You may pay anywhere from a few dollars a month to $100 or more for a Medicare Part D prescription plan. Medicare Advantage may charge nothing for added drug benefits.

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Despite the premium you pay, you may find that your Medicare Part D or Medicare Advantage plan requires you to pay 100 percent of the costs until a certain deductible amount is met. At that point in time, the plan’s benefits begin to take effect.

As a consequence of a low or zero-dollar initial deductible amount, you may find that you pay a higher monthly premium for your prescription drug plan. You may also find that the amount that you pay for your deductible each year will change.

What does your Medicare Part D pan cover?

The prescription drugs that your Medicare Part D plan cover will vary from plan to plan. That is why you will almost always be provided with a list of formulary drugs and their amount that is covered by your plan.

It’s vital that you check with each Part D plan, as one plan may cover more than another plan. Some plans may not cover the prescriptions you need at all.

In addition to covering prescription drugs based on multiple tiers, many Medicare Part D prescription plans offer a separate tier for injectable drugs, like insulin. The cost sharing options for injectable tiers tends to be higher.

When the time comes to use your coverage, you may find that your plan pays for a portion of your prescription costs, while you need to pay for a certain portion of the rest. The amount of money that you are required to pay for your plan’s coinsurance or copayment will also vary from plan to plan. This makes it important to understand what your plan covers after the set initial deductible amount is fulfilled.

A condensed summary of how a Medicare Part D plan works

Medicare Part D prescription drug and Medicare Advantage plans will be made available in your resident state each year. Drug plan premiums vary widely depending on plan type and insurer, among other factors. To find out more about the specifics, such as the plan features and premium costs, you will need to look for an overview of Medicare Part D plan coverage as it applies to your individual state.

Costs vary with Part D plans, but Medicare does put a limit on how much insurers can charge for annual deductibles each year. In 2016, the maximum annual deductible for Part D is $360. That amount will increase to $400 in 2017. It’s up to the insurer to decide the deductible amount, up to the maximum allowed. As discussed earlier, many plans have no annual deductible policies in plan, with coverage that kicks in as soon as you purchase your first prescription. But this is not always the case, which makes it all the more important to look over what your Part D plan covers.

In almost all Part D plans, you will find that prescription drugs are arranged in logical groups that have a fixed copayment amount based upon the group. This fixed-dollar amount will help you determine how much your prescription drugs cost you.

The Medicare Coverage Gap and Catastrophic Coverage

If your plan has a deductible, then your benefits will kick in after you’ve paid that amount. Your plan will then pay a substantial portion of the costs of your drugs until you reach the coverage limit, which is $3,310 in 2016. At that point, you’ll hit what’s known as the “donut hole” until you reach the out-of-pocket spending limit. Next year, the coverage limit will increase to $3,700. Once your out-of-pocket expenses reach $4,850 in 2016, you are only required to pay a co-payment of 5 percent under what is known as “catastrophic coverage.” This dollar amount is also the out-of-pocket spending cap, and it will increase to $4,950 in 2017.

While you’re in the donut hole, prescription drugs are sold at retail cost. However, due to the Affordable Care Act (ACA), there’s now a discount on prescriptions for people who get stuck in the coverage gap. In 2016, you get a 55 percent discount on brand-name drugs and a 42 percent discount on generics. Next year, the discount increases to 60 percent for brand-name drugs and 49 percent for generics. Brand name manufacturers will cover the discount even if your plan states that it has “no gap coverage.” Some plans will offer you a small increase in your monthly premium to continue covering you, even while you are in the coverage gap.

Under the Affordable Care Act, Medicare is required to pay more for prescription drugs in the coverage gap over time. By 2020, Medicare will pay 75 percent of the costs of both generic and brand-name drugs, and the participant will pay the remainder. This will effectively close the donut hole for good.

Additional Part D Points

Medicare Part D plans may provide you with additional benefits dependent upon your income levels. You will need to contact your Part D plan to learn about “Extra Help” programs if you are in financial need, as a number of low-income subsidies and middle-income help programs are available.

Many states offer additional help for individuals insured under Part D plans who cannot afford their medicine. You may find that as time goes on, your Part D plan’s premium increases annually. Prescription drug lists or formularies may change with 60 days of notice of being issued to you.

Who Oversees Medicare Part D

The Centers for Medicare and Medicaid Services (CMS) is responsible for overseeing all parts of the Medicare Part D prescription medicine program. It is only under the CMS’s supervision that private health insurance carriers can implement their Medicare Part D plans on a state-by-state basis across the country.

In 2017, there will be 746 standalone prescription drug plans available in the 34 regions that sell Part D plans (excluding territories). This represents a fairly large decrease in the number of standalone Part D plans available since last year, but each region will still have access to a variety of plans. Alaska residents, for instance, have 18 plans to choose from while people living in Pennsylvania can pick from 24 options.

A Brief History of the Medicare Part D Plan

Medicare Part D was established by the Medicare Prescription Drug, Improvement and Modernization Act of 2003. It was introduced into the House of Representatives on June 25, 2003, and sponsored by Speaker Dennis Hastert.

The bill itself took until November 25, 2003, to be passed by the House after several months of a deadlocked vote. On December 8, 2003, President George W. Bush signed the bill into law.

The initial purpose of Medicare Part D in the bill was to allow people in need to acquire voluntary and additional coverage.

The coverage gap’s effect on people insured under Part D plans has been substantially diminished since the Patient Protection and Affordable Care Act of 2010 (ACA or Obamacare) was put into place. Obamacare lessened the burden on people who get stuck in the donut hole by giving them discounts on their medication.

The coverage gap was further diminished in 2014, when other options were made available to insured individuals. This, in turn, decreased the amount of out-of-pocket expenses that they would be forced to pay while they were in the coverage gap.

Many private insurance companies that offer Part D plans designed their tiers to allow their insured to pay no copay for tier 1 drugs in 2014. Thresholds for the Coverage Gap and Catastrophic Coverage also dropped slightly in 2014.

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